Effects Of Microfinancing On Micro And Small Enterprises (Mses) In Southwest Nigeria

This  research  work  investigated  the  effects  of  micro-financing  on  Micro  and  Small Enterprises (MSEs) in South-west Nigeria. The study examined how micro-finance and non-financial micro-financing activities and features such as group membership, pre-loan training, cross guaranteeship, loan size, technical and managerial training, among others, impact  on  the  survival,  growth,  productivity  and  performance  of  Micro  and  Small Enterprises in Southwest Nigeria. The hypotheses formulated were developed around the theories of financial growth model, pecking order theory, and contract theory.

 Variables were  used  to  evolve  a  detailed  analysis  of  the  survival  and  growth  models.  The theoretical  models  were  used  in  developing  four  different  hypotheses  that  were investigated through the survey of four hundred and forty three (443) micro enterprises and one hundred and eighty (180) small enterprises which were randomly selected using multi-stage random sampling technique. Copies of well-structured questionnaire were administered to entrepreneurs sampled. The validity and reliability of the instrument were measured using Cronbach‟s alpha which gave a result of 0.72, while predictive form validity was 0.84. Four hypotheses were raised and tested at 0.05 significant levels.

The findings revealed that micro finance and micro-financing enhance survival of Micro and Small Enterprises (MSEs) but not sufficient for growth and expansion of such Micro and Small Enterprises. The result also revealed that microfinance has positive effects on productivity and performance of local entrepreneurs. The findings from the  interview sessions revealed that micro financing is not effective and substantially being practiced in Nigeria as many MFBs grant more individual loans than group based loans, thereby increasing their running cost and putting their portfolio at risk. We therefore recommend a collective and cooperative support as a critical microfinance strategy in the form of solidarity groups at the local level; and at the national and regional level, a networking of groups among operators of MFBs. We also recommend that enterprises supported by MFBs should be linked up with larger financing window like the SMEEIS fund or Strategic Partners for expansion and growth funding after survival.